Local coffees, herbal teas on the front burner

Trends in consumer demand for coffee and tea have in some ways paralleled those of the craft beer industry — local and artisanal varieties are in, while many mainstream brands “are collecting dust on the shelf,” on one buyer put it.

The trend is especially true in the coffee segment, where local roasters have gained cult-like followings that often expand regionally and even nationally when they gain a place in supermarket operators’ planograms.

Schenectady, N.Y.-based Price Chopper Supermarkets, for example, was the first supermarket chain to carry Death Wish Coffee, which started as a tiny local roaster in Saratoga Springs, N.Y., in 2012 and gained national notoriety by winning a 30-second commercial spot — through a contest sponsored by Intuit — in the 2016 Super Bowl.

“We realized they had a rabid local following, which grew to become regional, and then of course they had their commercial on the Super Bowl, and they became more of a national company,” said Mona Golub, VP of public relations and consumer services at Price Chopper. “It’s been exciting to see what they have done.”

She cited Green Mountain Coffee as another coffee roaster that started out as a local brand in neighboring Vermont and has since become national. Other local brands that have become more regional include Wicked Joe Coffee Co. and Pierce Bros Coffee Roasters, she said.

Consumers have become much more educated and discerning about coffee, Golub noted, and have high expectations for flavor and quality.

“Local coffee houses have developed loyal followings, not dissimilar to what’s evolved on the craft brewery landscape,” she said. “It’s a combination of superior quality products, handcrafted by aficionados who market their passion for excellence as much as they do their product.”

While mainstream coffee brands have been seeking to lure these discerning customers with more refined offerings, Golub said they will face challenges attracting those customers “who appreciate the care that goes into small-batch production.”

“Given the unique flavor profiles and the personalized connectivity that the local artisan brands are developing, attracting their loyal devotees will be a challenge,” she said.

Jessica Miller, a dietitian at Rogersville, Mo.-based Pyramid Foods, said Pyramid’s customers gravitate to local varieties of coffee.

“We are located in a college town, and coffeehouses are abundant here,” she said. “If they see a brand on our shelves that they have a connection to … they’re willing to spend the extra money.”

She said Pyramid has been carrying more local products on its shelves both to support local businesses and to satisfy customers.

Whole bean coffee

Consumers have also gravitated toward whole bean coffee, Miller said, as they seek out less-processed foods.

At Oliver’s Markets in Santa Rosa, Calif., whole bean coffee in bulk has been a popular offering, said Michael Moody, natural foods buyer at the four-store operator, which features both natural/organic and conventional product.

Each of the stores has about 18-24 bins of whole beans from several local roasters, such as Bella Rosa, and drives a brisk business in part by offering a $1 per pound discount to customers who reuse coffee cans.

“We have so many local coffee roasters right here in Sonoma County that we can't even carry [all of them],” said Moody. “It's a good problem to have.”

Bella Rosa, a locally roasted organic coffee brand also available on the shelf, has been “on fire,” Moody said.

Scott Owen, grocery merchandiser at PCC Community Markets in Seattle, said the local chain has had strong success partnering with a local roaster to produce a private label coffee line.

PCC Community Markets

Seattle-based PCC Community Markets carry a custom blend of whole beans in 24-ounce bags of a custom blend roasted at three levels, and ground coffee in 12-ounce bags.

PCC carries carries a custom blend of whole beans in 24-ounce bags of a custom blend roasted at three levels, and ground coffee in 12-ounce bags. The retailer also carries three seasonal single-farm or -origin coffees, which its local partner Tony’s Coffee buys in 4,000- to 5,000-pound micro lots after extensive taste testing.

“We put a lot of effort into the quality, only select organic and fairly traded beans, and then our creative team designs the most fantastic bags to sell them in,” said Owen. “The bags are little works of custom art, with descriptions based off our tasting notes, and we talk about our relationship with our partner Tony’s.”

“In a city like Seattle, that is quite an amazing result, but creative and marketing really did an amazing job with the rollout,” he said. “After that, the coffee sells itself.”

Michael Arbuckle, grocery sales director at Salt Lake City-based Harmons Grocery, said the chain has a strong relationship with local coffee roaster Caffe Ibis, based in Logan, Utah. The brand is featured both in Harmons Bistros and on the shelf.

Although working with local producers can take some extra time and effort, he said, “the payoffs are huge for us, and our customers appreciate it.”

While retail coffee sales overall have been increasing in recent years, the fastest growth has been among single-serving coffees, according to data from Nielsen. Dollar sales of coffee have seen a compound annual growth rate of 2.7% during the last five years, compared with 11.4% for single-serve coffee. Single-serve growth has slowed considerably, however, rising only 1.3%, to abut $3.8 billion, in the 52 weeks ended Dec. 30, 2017. That compares with a 1.2% decline for ground coffee in that time, to about $4.3 billion.

Herbal teas

In the dry tea category, Moody said Oliver’s customers have not been interested in high-end varieties. They have, however, scooped up functional and herbal teas, including a local brand called Traditional Medicinals. Other brands popular with Oliver’s customers include Yogi Tea, Stash Tea, Choice Organic Tea and Bigelow Tea.

Pyramid Foods’ Miller said shoppers are looking for attributes that signal health in the tea category.

“Matcha and turmeric are still trendy in the category right now,” she said. “Also, shopping the category to treat a condition is becoming more common.”

Teas that promote good digestion or better sleep, for example, are popular with customers.

“We may be at the point where we start looking to incorporate some of these over in our pharmacy areas to promote the medicinal functions of these products,” said Miller.

Harmons’ Arbuckle said some of the key trends he’s seen in shelf-stable teas include functional products with ginger and turmeric, along with matcha teas.

“We are searching for new brands that meet the needs of these growing demands,” he said, noting that many of the attributes consumers are seeking are being provided by niche companies. “They are often smaller, local premium brands that take some work and time to get into the store, but the payoffs are helping us win the beverage battle in this market.”

Brian Keating, founder of consulting firm Sage Group, said consumers are benefitting from the wide variety of teas available in all their various forms.

“It's a wonderful time to be a consumer because variety is king,” he said.

Trends in the tea category mirror those in other CPG categories, he said.

“While conventional grocery and many CPGs on the shelves of the stores are seeing sluggish growth of maybe 1 or 2%, natural foods are in the high single digits, or even low double digits in terms of growth,” he said. “I carry that same observation over to specialty tea. Conventional tea in America is flat to maybe 2% annual growth in mass market. What we're seeing in specialty tea is 4, 5, 8, 10% growth. I think what it says is that consumers are really very interested in specialty teas.”